entire - Deutsche Bank Annual Report 2012

Deutsche Bank 01 – Management Report 143
Financial Report 2010 Outlook
Revenues and profits in investment banking, by contrast, will probably remain under pressure for the time being,
even though client activity should be relatively supportive. Despite the financial crisis, the consolidation of providers
has made little headway; in fact, since the end of the crisis, some market participants have invested in expanding
their capacities again, thereby giving rise to intense competition. In addition, primarily because of regulatory
requirements, the financial service providers’ cost base has become less flexible and now involves a higher
proportion of fixed costs, making banks more vulnerable to volatile revenue developments. This effect is augmented
by cutbacks in proprietary trading and a stronger concentration on flow business for clients, as endorsed
by banks, supervisors and legislators. Finally, the new regulations under Basel 2.5 and Basel III will doubtless
lead to higher (capital) costs and narrower margins (in derivatives business, for instance), create greater hurdles
for securitizations and substantially reduce volumes in certain market segments.
The general outlook for capital markets business is also mixed. While debt issuance could be strong across
financial institutions and corporates, there are substantial downside risks, especially in the high-yield segment.
Equity capital raisings, on the other hand, are likely to remain at a solid level, and companies may significantly
intensify their M&A activities.
Global risks for the banking industry above all relate to an unexpectedly weak recovery of the world economy
from the financial and economic crisis, a potential sovereign default and overly costly and internationally fragmented
new regulations. In the latter respect, it is not just a question of how to implement the new Basel rules
as consistently as possible, but also of establishing clear resolution mechanisms for failed banks and avoiding
discriminatory specific bank levies.
The Deutsche Bank Group
Deutsche Bank Management has taken a series of steps to ensure that the bank is positioned strongly to exploit
the competitive opportunities which are arising after the crisis. We have made progress on all four elements set
out in Phase 4 of our Management Agenda. This ensures that the foundation for achievement of the 2011
target is in place. In particular, in our CIB businesses, we have further integrated the investment bank, which is
expected to deliver € 0.5 billion net benefit in 2011. Furthermore, we have increased our market presence in
the Netherlands via the acquisition of the commercial banking activities of ABN AMRO. This progress was
achieved while maintaining our risk discipline. In PCAM, we have strengthened our leading position in our
home market Germany with the takeover of Postbank, concluded the alignment of Sal. Oppenheim and completed
the restructuring of our Asset Management business. Meanwhile, we have continued to build out our
platform in Asia, where we are already well-positioned in all our core businesses, and decided to increase our
stake in Hua Xia Bank. We are also continuing to focus on our performance and improving efficiency and
accountability with our Complexity Reduction Program, which is on track to have all prerequisites in place by
the end of 2011 to deliver annual efficiency gains of € 1 billion, starting in 2012. In 2011, the program should
achieve € 0.6 billion net savings.